Why Consolidation Storm Is Brewing in Beer Industry

Heineken NV and Carlsberg AS have formed a consortium to bid for the United
Kingdom’s best-selling brewer, Scottish & Newcastle PLC, which calls the
proposition “unsolicited and unwelcome.” Coming a week after London’s SABMiller
PLC announced plans to combine its U.S. unit, Miller Brewing, with the U.S.
division of Molson Coors Brewing, the announcements reflect the brewers intent
to use increased market share to negotiate better deals for everything from
commodities to advertising that could bolster profits.

Jean-Francois van
Boxmeer, CEO of Netherlands-based Heineken, says that the beer industry today
takes so much capital that it isn’t worth the expense being in many of the
world’s markets unless your company is either the No. 1 or No. 2 player. He says
the best deals are ones that beef up a brewer’s share of an existing market, not
ones where it expands into a virgin one.

A week after two of America’s iconic brewers said they will combine forces, two European titans, Heineken NV and Carlsberg AS, said yesterday that they have formed a consortium to bid for the United Kingdom’s best-selling brewer, Scottish & Newcastle PLC.

The companies said they plan to divide up the assets
of S&N, which has a market value of $14.5 billion. The Edinburgh,
Scotland, brewer, however, reacted coolly, calling the proposition
“unsolicited and unwelcome.”

The announcement followed news that London’s SABMiller PLC planned to combine its U.S. unit, Miller Brewing Co., with the U.S. division of Molson Coors Brewing Co., creating a joint venture called MillerCoors.

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The Molson-Coors merger was interesting from a specialty beer point of view. The Blue Moon brand once brewed in Colorado is now brewed by Molson in Toronto, Canada. The brewing expertise is quite evident.
The Beer Doctor